exv10w18






EXHIBIT 10.18




IRVINE SENSORS CORPORATION

DEFERRED COMPENSATION PLAN




(Amended and Restated June 6, 2008, Effective as of January 1, 2005)




PREAMBLE




Effective September 27, 2002, Irvine Sensors Corporation (the “Corporation”), a corporation formed
under the laws of the State of Delaware, established a deferred compensation plan for the exclusive
benefit of a select group of management and highly compensated employees, which is called “The
Irvine Sensors Deferred Compensation Plan” (the “Plan”).



The Corporation intends that any Participant or Beneficiary under the Plan shall have the status of
an unsecured general creditor with respect to the Plan.



The Plan is hereby amended and restated effective January 1, 2005, to comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations issued thereunder.



The terms of this Restatement shall apply to: (i) deferred compensation that relates to all or in
part to services performed on or after January 1, 2005 (i.e., deferred compensation which is
subject to Code Section 409A), and (ii) deferred compensation that relates entirely to services
performed on or before December 31, 2004 (i.e., deferred compensation which is not subject to Code
Section 409A) if such deferred amounts were not yet paid from the Plan as of the adoption of this
Restatement.



ARTICLE I




DEFINITIONS




I.1 “Account” shall mean the record maintained by the Committee showing the number of shares of
common stock deemed allocated to the account of each Participant or Beneficiary as well as the
amount of any cash contributions, dividends or income or loss thereon deemed allocated to the
Participant or Beneficiary. The term “Account” shall refer only to a bookkeeping entry and shall
not be construed to require the segregation of assets or shares on behalf of any Participant or
Beneficiary.



I.2 “Beneficiary” shall mean the Beneficiary designated by each Participant under the Irvine
Sensors Corporation Deferred Compensation Plan; provided, however, that a Participant may designate
a different Beneficiary hereunder by delivering to the Committee a written beneficiary designation
in the form provided by the Committee, and executed specifically with respect to this Plan. No
beneficiary designation shall be effective until received and accepted by the Committee.



I.3 “Board” shall mean the Board of Directors of the Corporation.



I.4 “Change in Control” shall mean the occurrence of any one or more of the following events:




	 	(a)	 	any Person (as defined below) becomes the Beneficial Owner (as defined
below) of securities of the Corporation having fifty percent (50%) or more of the
total number of votes that may be cast for the election of directors of the
Corporation; or




 









 












	 	(b)	 	the stockholders of the Corporation approve the sale or other disposal of
all or substantially all of the assets of the Corporation (including a plan of
liquidation or dissolution) or the merger or consolidation of the Corporation with
or into another corporation, in accordance with the requirements of the Certificate
of Incorporation of the Corporation and applicable law; or
	 
	 	(c)	 	as a result of or in connection with any tender offer, exchange offer,
merger or other business combination, sale of assets or contested election of
directors, or any combination of the foregoing, the individuals who are directors of
the Corporation just prior to such event shall cease to constitute the majority of
the Board.





For purposes of this Section I.4, a “Person” means any individual, firm, corporation partnership,
trust or other entity. Two or more Persons who agree to ant together for the purpose of acquiring,
holding, voting, or disposing of securities of the Corporation shall be deemed a “Person.”
Excluded from the definition of “Person” are the Corporation and any subsidiaries of the
Corporation, whether individually or in any combination.



For purposes of this Section I.4, a person is a “Beneficial Owner” of securities of the Corporation
if such Person is any of such Person’s Affiliates (as defined below) or Associates (as defined
below) has or shares, directly or indirectly through any contract, arrangement understanding or
otherwise, the power to vote or direct the voting of securities of the Corporation or the power to
dispose or direct the disposition of securities of the Corporation. A Person shall be the
Beneficial Owner of those securities of the Corporation that such person or any of such Person’s
Affiliates or Associates has the right to become the Beneficial Owner of (whether such right is
execrable immediately or only after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights, warrants, options or
otherwise.



For purposes of Section I.4 only, an “Affiliate” of a specified Person is a Person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.



For purposes of this Section I.4, an “Associate” of a specified Person is (i) any corporation or
organization (other than the Corporation or any subsidiary of the Corporation) of which such Person
is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%)
or more of any class of equity securities, (ii) any trust or other estate in which such Person has
substantial beneficial interest or as to which such Person serves as trustee or in a similar
fiduciary capacity, or (iii) any relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person or who is a director or officer of the Corporation or any
subsidiary of the Corporation.



I.5 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time,
and the rules and regulations promulgated hereunder.



I.6 “Committee” shall mean the Committee appointed by the Board of Directors of the Corporation to
administer this Plan, or if none is appointed, the Board of Directors.



I.7 “Corporation” shall mean Irvine Sensors, Inc. or its successors.



I.8 “Disability” shall mean a medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months and renders the Participant unable to engage in any substantial gainful activity. The
determination



 









 





hereunder as to whether and when a Participant has a Disability shall be made by the
Committee, and for purposes of assisting the Committee in making any such determination, the
Committee may require the Participant to submit to an examination by a competent physician or
medical clinic selected by the Committee. In lieu of such an examination, a Participant shall be
considered to have a Disability if, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, the Participant is receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering employees of the
Corporation.



I.9 “Effective Date” shall mean September 27, 2002. This plan is amended and restated herein,
effective as of January 1, 2005.



I.10 “Normal Retirement Age” shall mean the age of sixty-five (65) years.



I.11 “Participant” shall mean an individual who has been designated by the Committee as being
eligible to participate in the Plan.



I.12 “Plan” shall mean the Irvine Sensors Corporation Deferred Compensation Plan, as amended from
time to time.



I.13 “Plan Year” shall mean the annual period beginning January 1 and ending December 31, both
dates inclusive of each year.



I.14 “Separation from Service” shall mean a complete severance of an employee’s employment
relationship with the Employers and all Affiliates, if any, for any reason other than the
employee’s death.




	 	(a)	 	Whether a Separation from Service has occurred is determined under Section
409A of the Code and Treasury Regulation 1.409A-1(h) (i.e., whether the facts and
circumstances indicate that the Corporation and the employee reasonably anticipated
that no further services would be performed after a certain date or that the level of
bona fide services the employee would perform after such date (whether as an employee
or independent contractor) would permanently decrease to no more than 20% of the
average level of bona fide services performed (whether as an employee or an
independent contractor) over the immediately preceding 36 month period (or the full
period of services to the employer if the employee has been providing services to the
employer less than 36 months)).
	 
	 	(b)	 	A transfer from employment with the Corporation to employment with an
affiliate of the Corporation shall not constitute a Separation from Service.





I.15 “Treasury Regulations” shall mean the regulations promulgated by the United States Treasury
Department under the Code. Any reference to a Section of the Treasury Regulations shall be
considered also to include any subsequent amendment or replacement of that Section.



I.16 “Valuation Date” shall mean each business day on which the financial markets are open for
trading activity.



 









 





ARTICLE II




PARTICIPATION




II.1 Participation in the Plan shall be made available to a select group of individuals, as
determined by the Committee, in its sole discretion, who are providing services to the Corporation
in key positions of management and responsibility or who are highly compensated employees of the
Corporation. The determination as to the eligibility of any individual to participate in the Plan
shall be in the sole and absolute discretion of the Committee, whose decision in that regard shall
be conclusive and binding for all purposes hereunder.



II.2 Eligible individuals may elect to participate hereunder by executing a participation agreement
in such form as the Committee shall require. Such election must be made and provided to the
Committee prior to the first day of the Plan Year. In the case of the first year in which the
Participant becomes eligible, the Participant must elect to participate by submitting the
designated participation agreement to the Committee within thirty (30) days of the date on which he
or she is notified by the Committee of his/her eligibility to participate in the Plan. The
election to participate in the Plan shall become irrevocable on the date that the Plan Year
commences.



II.3 In connection with the Participant’s election to participate in the Plan, the Participant
shall elect the form of payment to be received upon the Participant’s Separation from Service,
Disability, or attainment of Normal Retirement Age. The Participant may elect to receive such
amount in the form of either a lump sum or payments in annual installments over a period not to
exceed 5 years. Such election, once made and accepted by the Committee, shall be irrevocable.



ARTICLE III




CREDITING OF CONTRIBUTIONS AND INCOME




III.1 As of each Valuation Date, the Committee shall credit to each Participant’s Account the
deemed income or losses attributable thereto, determined pursuant to the provisions of Section
III.2 below, as well as any other applicable deemed credits to or charges against such Account, on
account of deemed Company Contributions or distributions to Participants or similar deemed
transactions or adjustments to such Account.



III.2 The Corporation may, in its sole discretion, make one or more deemed “Company Contributions”
to the Plan in such dollar amounts or shares of common stock of the Corporation as the Corporation,
in its sole discretion determines. Deemed Company Contributions shall be allocated among the
Accounts of Participants as specified by the Corporation in its sole discretion, as of the
Valuation Date immediately following the date of the Company Contribution, or as provided in a
Participant’s participation agreement



III.3 Each Participant’s Account shall be deemed to be invested in common stock of the Employer,
plus any cash contributions or cash dividends which would have been paid on such shares had such
shares been owned by the Participant. The Account of each Participant shall be deemed to be
credited with the amount of dividends, income, gains and losses attributable thereto, as if the
amounts credited to such Account had been invested in common stock of the Corporation, except to
the extent that the Company specifies that deemed contributions shall be in cash.



 









 





ARTICLE IV




BENEFITS




IV.1 The vested portion of a Participant’s account shall become distributable as of the earliest
date that one of the following events occurs:




	 	(a)	 	the Participant’s death;
	 
	 	(b)	 	the later of the Participant’s Separation from Service or attainment of
Normal Retirement Age; and
	 
	 	(c)	 	the Participant incurs a Disability.





IV.2 As soon as practicable following one of the events in Section IV.1, the Participant or
Beneficiary shall commence to be paid the number of shares of common stock deemed credited to such
Participant’s Account. In addition, the Participant or Beneficiary shall be paid the amount of
deemed cash contributions and deemed cash dividends, if any, which were allocated to the
Participant’s Account, plus any earnings or losses thereon in the form of cash. The amount of any
such deemed cash contributions and deemed cash dividends shall be determined as of the Valuation
Date coincident with or next preceding the date such amount is distributed.



IV.3 Each Participant’s Account shall be fully vested and nonforfeitable.



ARTICLE V




FORM AND METHOD OF PAYMENT OF BENEFITS




V.1 Payment of a Participant’s benefit as determined in accordance with Article IV on account of
death shall be made (i) in the method of a lump sum, and (ii) in the form of common stock of the
Company to the extent that the Participant’s Account is deemed to be invested in common stock of
the Company and in cash to the extent that the Participant’s Account is deemed to be invested in
cash or other property. Payment of a Participant’s death benefit shall be made to his Beneficiary
as soon as practicable following the Committee’s receipt of proper notice of such Participant’s
death.



V.2 Payment of a Participant’s benefit as determined in accordance with Article IV on account of
Disability, attainment of Normal Retirement Age or Separation from Service shall be made (i) in the
form of common stock of the Company to the extent that the Participant’s Account is deemed to be
invested in common stock of the Company and in cash to the extent that the Participant’s Account is
deemed to be invested in cash or other property and (ii) in the method of either a lump sum or in
annual installments over a period not to exceed 5 years, as elected by
the participant upon commencement of participation in the Plan (See Section II.3). Payment shall
commence as soon as practicable following the later of the date of Participant’s Separation from
Service or attainment of Normal Retirement Age. In the case of payment on account of a
Participant’s Disability, payment shall commence as soon as practicable after the Committee’s
determination of such Disability.



V.3 If cash installment payments are made, such payments shall be charged pro rata to the
individual investment options in which amounts credited to the Participant’s Account are deemed to
be invested, pursuant to the provisions of Section III.3 hereof. Furthermore, the Committee shall
continue to credit the unpaid balance of the Participant’s Account with the deemed income and
losses attributable thereto, determined pursuant to the provisions of Section III.3 hereof, as well
as with any other credits to or charges against the unpaid balance of such Account, during the
period for which installment payments are made.



 









 





V.4 Nothwithstanding the foregoing, where payment is made under this Section V to a “specified
employee,” as defined under Section 409A of the Code, due to Separation from Service, such payment
shall commence as of the date which is 6 months and 1 day after the date of Separation from Service
(or upon the death of the employee, if earlier).



V.5 Notwithstanding the provisions of Sections V.1 or V.2, the benefits payable hereunder may be
even if they are not otherwise payable if, based on a change in the federal or applicable state tax
or revenue laws, a published ruling or similar announcement issued by the Internal Revenue Service,
a regulation issued by the Secretary of the Treasury, a decision by a court of competent
jurisdiction involving a Participant or a Beneficiary, or a closing agreement made under section
7121 of the Code that is approved by the Internal Revenue Service and involves a Participant, the
Committee determines that a Participant has or will recognize income for federal state income tax
purposes with respect to amounts that are or will be payable under the Plan before they otherwise
would be paid. The amount of any payments pursuant to this Section 5.5 shall not exceed the lesser
of (a) the amount in the Participant’s Account or (b) the amount of taxable income with respect to
which the tax liability is assessed or determined.



ARTICLE VI




ADMINISTRATION OF THE PLAN




VI.1 The Corporation shall set aside in a grantor trust funds or shares of common stock for payment
of all or a portion of the benefits payable pursuant to the Plan. The set aside funds shall be
subject to the claims of general creditors of the Corporation in the event the Corporation becomes
insolvent.



VI2. The Plan shall be administered by the Committee who shall be appointed by the Board of
Directors of the Corporation. The members of the Committee shall not receive compensation with
respect to their services for the Committee. The members of the Committee shall serve without bond
or security for the performance of their duties hereunder unless applicable law makes the
furnishing of such bond or security mandatory or unless required by the Corporation. Any member of
the Committee may resign by delivering his written resignation to the Corporation and to the other
members of the Committee.



VI.3 The Committee shall perform any act which the Plan authorizes expressed by a vote at a meeting
or in a writing signed by a majority of its members without a meeting. The Committee may, by a
writing signed by a majority of its members, appoint any member of the Committee to
act on behalf of the Committee. Any person who is a member of the Committee shall not vote or
decide upon any matter relating solely to himself or vote in any case in which his individual right
or claim to any benefit under the Plan is particularly involved. If, in any matter or case in
which a person is so disqualified to act, the remaining persons constituting the Committee cannot
resolve such matter or case, the Board will appoint a temporary substitute to exercise all the
powers of the disqualified person concerning the matter or case in which he is disqualified.



VI.4 The Committee may designate in writing other persons to carry out its responsibilities under
the Plan, and may remove any person designated to carry out its responsibilities under the Plan by
notice in writing to that person. The Committee may employ persons to render advice with regard to
any of its



 









 





responsibilities. All of the usual and reasonable expenses of the Committee shall be
paid by the Corporation. The Corporation shall indemnify and hold harmless each member of the
Committee from ‘and against any and all claims and expenses (including, without limitation
attorney’s fees and related costs), in connection with the performance by such member of his duties
in that capacity, other than any of the foregoing arising in connection with the willful neglect or
willful misconduct of the person so acting.



VI.5 The Committee shall establish rules, not contrary to the provisions of the plan, the
administration of the Plan and the transaction of its business. The Committee shall determine the
eligibility of any individual to participate in the Plan, shall interpret the Plan in its sole and
absolute discretion, and shall determine all questions arising in the administration interpretation
and application of the Plan. All determinations of the Committee shall be final, conclusive and
binding on all employees, participants and Beneficiaries.



VI.6 Any action to be taken hereunder by the Corporation shall be taken by resolution adopted by
the Board or an executive committee thereof; provided, however, that by resolution, the Board or an
executive committee thereof may delegate to any officer of the Corporation the authority to take
any actions hereunder, other than the power to amend or terminate the Plan.



VI.7 Each Participant will be issued a participation agreement under the Plan which will specify,
as to that Participant; the amount of Company contributions to be made to the Plan on behalf of the
Participant, the Participant’s vesting schedule, and any other conditions or benefits the Committee
deems in its sole and absolute discretion to be appropriate.



ARTICLE VII




CLAIM REVIEW PROCEDURE




VII.1 In the event that a Participant or Beneficiary is denied a claim for benefits under this Plan
(the “Claimant”), the Committee shall provide to the Claimant written notice of the denial which
shall set forth:




	 	1.	 	the specific reason or reasons for the denial;
	 
	 	2.	 	specific references to pertinent Plan provisions on which the Committee
based its denial;
	 
	 	3.	 	a description of any additional material or information needed for the
Claimant to perfect the claim and an explanation of why the material or information
is needed;
	 
	 	4.	 	a statement that the Claimant may:






	 	(i)	 	request a review upon written application
to the Committee;
	 
	 	(ii)	 	review pertinent Plan Documents; and
	 
	 	(iii)	 	submit issues and comments in writing; and




 









 











That any appeal the Claimant wishes to make of the adverse determination must be in writing to the
Committee within sixty (60) days after receipt of the Committee’s notice of denial of benefits.
The Committee’s notice must further advise the Claimant that his failure to appeal the action to
the Committee in writing within the sixty (60) day period will render the Committee’s determination
final, binding, and conclusive.



VII.2 If the Claimant should appeal to the Committee, he, or his duly authorized representative,
may submit, in writing, whatever issues and comments he, or his duly authorized representative,
feels are pertinent The Committee shall re-examine all facts related to the appeal and make a final
determination as to whether the denial of benefits is justified under the circumstances. The
Committee shall advise the Claimant in writing of its decision on his appeal, the specific reasons
for the decision, and the specific Plan provisions on which the decision is based. The notice of
the decision shall be given within sixty (60) days of the Claimant’s written request for review,
unless special circumstances (such as hearing) would make the rendering of a decision within sixty
(60) day period infeasible, but in no event shall the Committee render a decision regarding the
denial of a claim later than 120 days after its receipt of a request for review. If an extension
of time for review is required because of special circumstances, written notice of the extension
shall be furnished to the Claimant prior to the date the extension period commences. The
Committee’s notice of denial of benefits shall identify the address to which the Claimant may
forward his appeal.



ARTICLE VIII




LIMITATION OF RIGHTS




The establishment of this Plan shall not be construed as giving to any Participant, employee of the
Corporation or any person whomsoever, any legal, equitable or other rights against the Corporation,
or its officers, directors, agents or stockholders, or as giving to any Participant or Beneficiary
any equity or other interest in the assets or business or shares of Corporation stock or as giving
any employee the right to be retained in the employment of the Corporation. All employees of the
Corporation and Participants shall be subject to discharge to the same extent they would have been
if this Plan had never been adopted. The rights of a Participant hereunder shall be solely those
of an unsecured general creditor of the Corporation.



ARTICLE IX




LIMITATION OF ASSIGNMENT AND PAYMENTS TO LEGALLY INCOMPETENT
DISTRIBUTEE




IX.1 No benefits which shall be payable under the Plan to any person shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and
any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise
dispose of the same shall be void.



IX.2 No benefit shall in any manner be subject to the debts, contracts, liabilities, engagements or
torts of any person, nor shall it be subject to attachment or legal process for or against any
person, except to the extent required by law.



 









 





IX.3 Whenever any benefit which shall be payable under the Plan it to be paid to or for the benefit
of any person who is then a minor or determined by the Committee, on the basis of qualified medical
advice, to be incompetent, the Committee need not require the appointment of a guardian or
custodian, but shall be authorized to cause the same to be paid over to the person having custody
of the minor or incompetent, or to cause the same to be paid to the minor or incompetent without
the intervention of a guardian or custodian, or to cause the same to be paid to a legal guardian or
custodian of the minor or incompetent, if one has been appointed, or to cause the same to be used
for the benefit of the minor or incompetent.



ARTICLE X




AMENDMENT TO OR TERMINATION OF THE PLAN




X.1 The Corporation reserves the right at any time to amend or terminate the Plan in whole or in
part by resolution of the Board. No amendment or termination shall have the effect of
retroactively changing or depriving Participants or Beneficiaries of rights already accrued under
the Plan. Upon termination of the Plan, the Corporation may, in its discretion, amend the Plan to
accelerate the time and form of payments, to the extent permissible under Section 409A of the Code
and Treasury Regulations issued thereunder.



X.2 In the event that the Corporation shall change its name, the Plan shall be deemed to be amended
to reflect the name change without further action of the Corporation, and the language of the Plan
shall be changed accordingly.



ARTICLE XI




STATUS OF PARTICIPANT AS UNSECURED CREDITOR




All benefits under the Plan shall be the unsecured obligations of the Corporation and no assets
will be placed in trust or otherwise segregated from the general assets of the Corporation for the
payment of obligations hereunder. To the extent that any person acquires a right to receive
payments hereunder, such right shall be no greater than the right of any unsecured general creditor
of the Corporation.



ARTICLE XII




GENERAL AND MISCELLANEOUS




XII.1 In the event that any provision of this Plan shall be declared illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but
shall be fully severable and this Plan shall be construed and enforced as if said illegal or
invalid provision had never been inserted herein.



XII.2 The section headings and numbers are included only for convenience of reference and are not
to be taken as limiting or extending the meaning of any of the terms and provisions of this Plan.
Whenever appropriate, words used in the singular shall include the plural or the plural may be read
as the singular. When used herein, the masculine gender includes the feminine gender.



 









 





XII.3 The Plan is intended to comply with the requirements imposed under Section 409A of the Code,
and the provisions of the Plan shall be construed in a manner consistent with the requirements of
such section of the Code.



XII.4 The validity and effect of this plan and the rights and obligations of all persons affected
hereby shall be construed and determined in accordance with the laws of the State of California
unless preempted by federal law.



XII.5 The Corporation is not required to set aside any assets for payment of the benefits provided
under this Plan. A Participant shall have no security interest in any such amounts. This Plan is
intended to be and shall be construed to be a plan which is funded and maintained primarily for the
purpose of providing deferred compensation for a select group of management or highly compensated
employees.



XII.6 All amounts payable hereunder shall be reduced by any and all federal, state and local taxes
imposed upon the Participant or his Beneficiary which are required to be paid or withheld by the
Corporation.



Irvine Sensors Corporation has caused its corporate seal to be affixed hereto and these presents to
be duly executed in its name and behalf by its proper officers thereunto duly authorized this 6th day of June 2008.



	 	 	 	 	 
	 	Irvine Sensors Corporation

 	 
	 	By:  	/s/ John J. Stuart 	 
	 	 	John J. Stuart 	 
	 	 	Sr. Vice President, CFO, Corporate
Secretary, Treasurer 	 
	 
	 	 	ATTEST: 	 
	 
	 
	 
	 	 	[CORPORATE SEAL]